Japan's video game industry is under heavy scrutiny, from business and creative angles. At the end of Tokyo Game Show, Gamasutra EIC Kris Graft questions whether the Japanese industry can return to its former glory.

Getting a grasp on what exactly is going on in Japan is a difficult task for me, because well, it's on the other side of the world and I don't exactly have frequent face-to-face contact with the Japanese game industry. It doesn't help that I speak virtually no Japanese, which has made my time here during Tokyo Game Show interesting!

I'll be honest -- I don't have that much more direct experience with what's going on with the Japanese video game industry than Gamasutra's typical reader. Every now and then, we'll see the occasional quote from an outspoken critic, like former Capcom figurehead and Mega Man co-creator Keiji Inafune, who accuses Japan's industry of being creatively bankrupt. But those soundbites don't get down to the root of the problem.

Shin Unozawa, a long-time Namco Bandai executive and the head of Japan's video game trade body CESA (Computer Entertainment Software Association), made an effort to convince a group of media and professionals at Tokyo Game Show that there is nothing to see here; just like in the U.S., Japanese companies are struggling to increase their online sales mix, and just like here in the U.S., the lagging physical retail sales numbers that are widely reported do not accurately represent an industry that is going increasingly digital.

He called for game publishers to be more open with their digital sales figures, citing a few examples of "traditional" Japanese game publishers making some money on digital sales-reliant games like Fire Emblem and the new version of Phantasy Star Online 2. The message was that people should be optimistic about the Japanese game industry. Publishers have good and bad years, but overall, the Japanese industry is holding steady, he said. Things are changing, things are improving.

I entertained his sentiment. "Why are we always talking about the struggles of Japan as if its struggles are exclusive to that region?" I figured. Surely there are plenty of examples of creative bankruptcy on this side of the world, and examples of poorly-run businesses. The West has had its share of layoffs, of studios shutdowns, of floundering video game stock. We're all in the same boat, right?

It'll all be alright... right?

I chatted briefly with Game Developer magazine editor-in-chief Brandon Sheffield, someone whose knowledge of the inner-workings of the Japanese game industry are second-to-none in U.S. game journalism. He's worked with Japanese game companies in some capacity for the last seven years, and I often mistake him for a dainty, stylish Shibuya club-dweller. Anyway, he knows a lot about Japan, among other things.

I bring up my theory that really, the West isn't that much better off than Japan, right? That we needn't compartmentalize and segregate the "Japan problem." Plus, it's gonna get better over there, right? Right?!

Brandon put his hand on my shoulder and said gently, "No, Grafty. Japan is fundamentally screwed and it will only get worse without a massive shift in corporate culture." [Paraphrased] He then floated away and I woke up, realizing that he's not in Japan with me right now. But dammit, he was right.

The reason is well-documented. It's the culture; a culture based on the robotic efforts of salarymen, as opposed to the visionary impulses and ideas of creatives. A culture where you need to stay at work and warm your seat longer than your boss, lest you earn his wrath. It's about the paycheck, about stability, and in the end, about playing catch up instead of being innovative.

What's worrisome, then, is that isn't changing, not within the old guard of Japanese game publishers. And if culture is at the root of the issue, this insidious problem could infect newer Japanese game businesses that are dealing in emerging markets such as mobile games. I saw this firsthand following an evening interview appointment at a company's office in Tokyo. I worried that I was keeping one very helpful PR rep around too late. He laughed, and said it's okay. His boss was in meetings, and this isn't the kind of company where you leave work before your boss does, anyway.

Inafune told me at TGS this week, "In the U.S., it's more about the individual. In Japan, it's more about the company." It's ironic that he recognizes this, yet partners his independent studio with monolith Japanese game publisher Tecmo Koei, a "company" if there ever was one, for the upcoming Ninja Gaiden Z. He says the creative vision is his, and you know, I believe him. At the same time I'd love to be a fly on the wall and see just how much influence "the company" has over the development of that game.

I grew up on Japanese games, just like a lot of Gamasutra's staff, and just like a lot of our readers. I worry about the state of the Japanese game industry, I worry that Japanese companies are still too worried about mimicking successful Western games, or creating these homogenous, bland experiences, instead of embracing the "Japanese-ness" that so many people still love.

I read Wall Street Journal Asia this weekend. Its report on Tokyo Game Show talked almost exclusively about just two companies: Gree and DeNA, the country's mobile and social game juggernauts. There are innovative things happening there, and they are finding success with games that look and feel Japanese, not just locally, but on a global scale. That's encouraging.

Other, more "traditional" game companies like NanaOn-Sha, Platinum, From Software, and Grasshopper Manufacture also embrace their Japanese aesthetic. They make the games they want, and have found a global audience. Are they reaching Call of Duty-scale commercial success? No, but they're staying true to their creative vision, and people appreciate that immensely.

But what of the Japanese game industry's health overall? What of the future of companies like Sega, Capcom, Konami, etc.? Even with the success of Gree and DeNA, the old guard of publishers is still, of course, a major component of the industry. CESA can show us graphs, it can highlight a few games from traditional publishers that are doing okay in terms of digital sales, it can implore the media to look on the bright side. I want to believe that Japan can overcome the challenges, but just taking a small step back and looking at the situation dispassionately, I need to agree with the critics. It's the culture that is slowly but surely strangling large swaths of the Japanese video game industry, and there's no real end in sight.